Large Settlements Means Big Decisions
One of the best parts of my job is giving big checks to families on occasion. Now, you know that not every case that I handle turns out to be as serious as the one I’m going to tell you about.
In this particular case, the husband and wife were injured by a negligent and careless driver. They both were treated for serious, but not life-threatening trauma, and eventually made a full recovery. The final settlement was significant enough that during the disbursement of their money an interesting conflict arose.
They were going to be receiving a check for the remaining amount of their settlement money, which was about $83,000. Because this is compensation and not wages, income, nor gain; it is nontaxable. It is not every day someone hands you a check for your part of a settlement that is $83,000 effectively cash.
Because it was still more than they were expecting, they were very happy. It’s a great part of my job. And the wife said, “Hey honey, that’s about how much we owe on our home to pay it off.” And they began to talk about paying off the mortgage on their home.
As I was preparing the final documents, I noticed the wife begin to discuss all the other things that could be done with that $83,000: Renovations to the home and kitchen, a cruise or a vacation, or a huge emergency fund that would make her feel secure.
The husband was continuing to discuss how nice it would be to have a paid for house for the first time in their lives.
As I completed the paperwork, and my staff was providing their copies to them, their discussion continued. The wife was saying something to the effect of, “I’ve never had this kind of money. Just imagine having $83,000 dollars in the bank and how secure that would make us feel.”
It was clear that they had no emergency fund left after the accident had occurred. It was apparent that there would be nothing left of this check if they used it to pay off their home mortgage.
As you might expect, they eventually looked at me and asked what I would do. And I told them I would answer their question like a good lawyer would, I would ask them a couple questions.
I proposed the following scenario to them: “You are both sitting here in a different situation. Your house is paid off, but there is no emergency fund whatsoever. Both of you are working and everything else is the same as now. However, I tell you that I know a mortgage guy who can loan you enough money for you to put $83,000 in the bank just to feel secure, and you can make payments against that at a reasonable payment in the amount you’re making right now.” So, I asked, “If your house was paid off would you take out a mortgage to put $83,000 in the bank for security?
She said that sounded “stupid to her.”
And I told her I thought it was the same thing.
I later learned that they had paid off their house and had no trouble creating a pretty nice emergency fund as they continued to make a house note, but now, to themselves.
What would you do?
Mr. Peel seeks justice for those injured in motorcycle, truck and car accidents, disability and medical malpractice. He often addresses churches, clubs and groups without charge. Mr. Peel may be reached through PeelLawFirm.com wherein other articles may be accessed.